This Website Is For Financial Professionals Only

First, to address the stereotype, it turns out that only about 1/3 of Schwab's "independent" clients feel comfortable making their own investment decisions.

That may indicate that there's a huge untapped market here for pure advisors willing to prospect Schwab's traders with the promise of model portfolios, regular financial advice, retirement planning, and other subsidiary services.

On the other hand, Schwab's clientele may be too trading-focused and too small to capture the typical advisor's attention.

But this hasn't been lost at Schwab, which is rolling out hybrid active/index products -- basically one-stop portfolios -- with the promise of "embedded advice."

The product architecture doesn't seem new. Basically, these are something like target date funds or special purpose model portfolios, only with a new marketing spin.

Target date funds became a huge force in the industry on the implicit promise that the "retirement planner" was baked into the recipe and people could get a pretty good retirement portfolio in one swoop.

If Schwab can sell the "advisor inside" through these portfolios, it might be able to earn itself a richer slice of the mass affluent market. Presumably these products will charge for the added complexity while repackaging funds the company already has one the shelf.

On the other hand, it remains to be seen whether Schwab traders will be happy making what amounts to a single trade instead of tweaking various allocations day in and day out. That's how Schwab makes its money, after all.

If buy-and-hold firms like Vanguard and Fidelity adopt this model, we'll know it's getting traction. Until then, this may be either a revolution in the works or just an experiment.

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